Strategy and Competition

Final Exam: 50%

Students are required to read the Apple Inc. in 2010 case study and answer FIVE (5) of the
following questions. They are required to submit their answers within the stipulated time frame.
1- What, historically, have been Apples competitive advantages?
Apples competitive advantages are its innovation, strong brand and rapid growth.
In the Sculley years, Sculley pushed the Mac into new markets, most notably in desktop
publishing and education. Apples desktop market was driven by its superior software
and peripherals. In education, Apple grabbed half the market. Apples worldwide market
share recovered and stabilized at around 8%. By 1990, Apple had $1 billion in cash and
was the most profitable company in the world. Macintoshs loyal customers allowed
apple to sell its products at a premium price. That shows apples competitive advantages
included customers loyalty.
Spindler killed the plan to put the Mac OS on Intel chips and announced that Apple
would license a handful of companies to make Mac clones. He tried to slash costs, cut
Apples workforce, and pushed for international growth.
Amelio proclaimed that Apple would return to its premium-price differentiation strategy.
Apples failure to produce a new OS keep it ahead of Microsoft Windows 95.
Steve Jobs acquired NeXT Software and develops OS based on it. Jobs abruptly halted
the Macintosh licensing program. Other restructuring efforts involved hiring Taiwanese
contract assemblers to manufacture Mac products and revamping Apples distribution
system from smaller outlets to national chains. Apple launched a website to set up direct
sales for the first time. Internally, Jobs focused on reinvigorating the innovation. Apple
increased its spending on R&D. Jobs first real coup was IMac in 1998 posted $309
million profit, reversing $1 billion loss.
In terms of General external environment, it is difficult to substitute Apple products with
other products because of its innovation, creativity, and the technology know-how of easy
to use. Apple has strong customers/buyers in the market. Apple has strong suppliers who
would give them good deal. Apple has specific complementors such as its own printers
and software iPhoto, some are free, upgradable and downloadable online. The rivalry in
Personal Computer Industry is only Dell because it invests 1% of revenue to R&D. It is
hard to compete with Apple Computer and Apple products because for personal
computers, Apple can function both Mac OS and Windows. SamSung has become
Apples rival in terms of mobile phones, laptops, notepads, and touch panels. The entry to
the market is not easy, otherwise it could be beaten out easily by strong market players in
the market or easily taken out by acquisition.

The internal analysis tool Apple has a strong brand name so, it has value. It is rare to be
like Apple. It is easy to imitate like Apple. However, there are copyright laws and all so it
cannot be all exactly identical. It will be costly to imitate. The organization is a solid
organization formed by Steve Jobs so it is hard to fall apart. Thats why, Apple can have
a sustained advantage if there is R&D and innovation keep on going. The economic
implications are above normal.

2- Analyze the Personal Computer industry. Are the dynamics favorable or problematic for
Apple?
It was Apple which pioneered first usable personal computing devices. It was IBM that
brought PCs into mainstream in the 1980s. Growth was driven by lower prices and
expanding capabilities. Revenue growth failed to keep pace with volume growth. New
PC Products emerged as well. More expensive laptop computers gained traction. Portable
PCs represented 57% of worldwide PC shipments and were expected to reach 70% by
2012. Desktop costs $544, lower price led to higher sales volume. A new subcategory,
net book arisen sold for around $400.
The dynamics have led Apple to produce Apple Desktop, Macbook Air, Macbook Pro.
Even in Macbook Air and Macbook Pro, there are certain 13, 1517, 19. To compete
with netbook, it has produced ipad, and use peripherals such as small keyboard and
mouse along to function as a small notepad. Apple may produce smaller size that can
compete with netbook in the future.
Dynamics are favorable for Apple because it has led apple to expand its own market. It
has led Apple from mature industry structure to emerging industry structure. Apple was
in mature industry structure, which is slowing growth in demand, technology standard
exists, increasing international competition, industry wide profits declining, and industry
exit is beginning. Steve Jobs has refined current products, improved service, and process
innovation. Hence, it has become emerging industry structure. In emerging industry
structure, new industry based on break through technology or product ipod, iphone, and
ipad, no product standard has been reached, no dominant firm has emerged yet. The only
rivals that come to Apple are Dell because it has put 1% of Revenue to its own R&D.
New customers come from non-consumption not from competitors. However, SamSung
has become Apples strong competitors. Opportunities are first-mover advantages. It is
by improving technology, locking-up assets, and creating switching-up costs. Those who
can design or create or someone who is the first to be very innovative will attract most
consumers. However, that of course has to be of a strong brand like Dell, Apple, HewlettPackard, Acer or Lenovo, not just a random new brand from China could attract most
customers due to warranty issues and long lives usage. Dell was the only top four PC
vendor to lose its worldwide market share. Acer bought Gateway and became third

largest PC vendor in the world. Acer bought Packard-Bell and has become a strong
presence in Europe. Lenovos greatest strength was its own dominant position in China,
where it commanded a third of the market.

3- How sustainable is Apples competitive position in PCs?

Although Apples company remained committed to the education market, new PC
products focused on home consumers lifestyle. Due to several technological innovations
and a new retail strategy, Apple became the fourth largest PC vendor in the U.S. market
with an 8% share by the end of 2009. The companys greatest strength lay in premiumpriced PC category; 91% of PCs priced $1000 and above in the U.S. market and were
sold by Apple.
However, that of course has to be of a strong brand like Dell, Apple, Hewlett-Packard,
Acer or Lenovo, not just a random new brand from China could attract most customers
due to warranty issues and long lives usage. Dell was the only top four PC vendor to lose
its worldwide market share. Acer bought Gateway and became third largest PC vendor in
the world. Acer bought Packard-Bell and has become a strong presence in Europe.
Lenovos greatest strength was its own dominant position in China, where it commanded
a third of the market.
Apple has innovative designs that are rare. Due to copyrights, it cannot copy identically.
Apple products are valuable quality given and quality received are equal. It is costly to
imitate. The materials used in Apple are slightly different from that of normal PC. Apple
has advantage that Apple PC can run both Windows and Mac OS X, based on UNIX, or
Leopard. Apple PC has a variety of Applications such as in iLife (iPhoto, iTunes, iWeb).
Apple has developed its own web browser safari. What customers attract Apple is due to
Apples eye-catching Macintosh designs, and variety of softwares and applications
available for Apple products. It is a technology world, Apple should continuously put an
effort on R&D and maintain their current status, now it is at its own peak to continue its
above normal status. In terms of competitive implications, apple has a strong brand, it can
be temporary advantage since technology change is changing dynamically. Some
Windows user prefer still Windows like Dell and Asus has produced special computers
for gamers which are faster speed and faster to download, faster streaming than normal
apple computers.
4- How sustainable is Apples competitive position in MP3 Players?
The iPod was initially one of many portable digital music players based on the mp3
standard. The advantages of iPod to normal MP3 players are its sleek design, simple user
interface, and large storage. By 2010, Apple reportedly held more than 70% of the MP3

market in the United States. The biggest component for iPod Nano was its flash memory.
Apple subsequently became one of the largest purchasers of flash memory in the world.
Within the iPod Product line, the touch was the first iPod that had built-in WiFi, a 3.5
inch screen, and a multi-touch graphical interface. Popular handheld gameplayers such as
the Nintendo DS and Sony PSP suddenly found themselves competing with the touch.
Rivals in the MP3 player market are SanDisk, Creative and SamSung; each had a market
share below 10%. Microsoft also introduced Zune line of music players in 2006. Most
iPods ASPs generally ran $50 to $100 higher than the competition. At the hardware level,
most players were roughly comparable to iPod Models. Yet Competitors found
themselves a major disadvantage with the emergence of Apples iTunes store. Apples
iTunes store is the store where the songs are sold and be downloaded online which is
cheaper than purchase the CD. Online music stores such as Amazon.com, Napster, and
Walmart.com offered individual song downloads at competitive or discounted prices to
iTunes. To put more pressure on Apple, some of these stores to sell DRM-free music for
more than a year before signing the new agreement with Apple. Songs of the artists can
be downloaded from social networking services such as myspace and facebook. There are
internet radio sites such as Pandora, Last.Fm, Spotify.
Jobs had two responses to these threats. In 2009, he bought Lala.com, a music streaming
service. The deal had raised speculations that Apple could be exploring alternative model
to store and play digital music, bypassing downloads on media player altogether. In June
2007, he introduced the iPhone.
In the MP3 market, the iPods are valuable. It is not rare. The hardware qualities of the
rivals are about the same. The apples only advantage is they have itunes store. It is only
temporary advantage or parity because there are many other cheaper song selling sites,
free music streaming sites, social networking sites and radios. The economic implications
are normal for MP3 market.

5- How sustainable is Apples competitive position in Smartphone?

Before 2007, Nokia, Motorola and Samsung dominated 60% of the smartphones market
share. Starting in the mid-1990s, the industrys preference shifted towards the feature
phones that offered more attractive hardware designs and user-friendly interfaces, which
was pioneered by Nokia, the worlds largest mobile phone manufacturer. Multi-media
functions, such as high-end camera, Internet Browser, PDA Device, and media player.
With the first iphone, AT&T, the exclusive US Operator did not provide a subsidy.
Instead, AT&T agreed to an unprecedented revenue sharing agreement with Apple,
which gave Apple control over distribution, pricing and branding.

According to one analysis, bill of materials for the latest 16GB iPhone model was just
under $180. The first iPhone with half of that storage capacity cost around $220 to build.
Lower prices and wider international distribution (94 countries) fueled sales. The key
factor behind the iPhone sensation was the extension of the iPhones ecosystem with the
launch of Apple App Store in 2008. Apples app store was the first outlet that made it
easy to distribute, access, and download applications directly onto the mobile phone.
Customers downloaded apps onto their iPhones over the network or download them to
their PC. Many apps were free; even paid apps usually started from 99 cents. More than
185,000 applications were offered from health to business to game categories.
Apples competitors fell into two large categories based on their models: Research in
motion (RIM), Palm, and Nokia, took a similar approach to Apple by controlling both
hardware and software. RIMs blackberry provides best email experiences with 550
carriers in 175 countries. In 2010, RIM and Apple were the most profitable smartphone
companies in the world. However, the peak of RIM has fallen in the later years when
SamgSung and HTC market has arisen in 2013 and 2014. Palm, on the other hand, was
struggling to survive. Nokias market share has fallen when its OS shifted from Symbian
to Ovi. Nokias market share was not strong in US initially. It was only in India and
China. However, Iphone, SamSung and HTC has taken over in place of it.
Manufacturers such as HTC, Samsung Electronics, LG Electronics and Motorola used
Googles free Android OS or Microsoft. By 2010, there were about 50 Android-based
smartphone models in the market and Android had gained 4% market share. Android
market place, Googles competitive App store was gaining momentum.
Apples Limitations to use on AT&T network in the US was a limiting factor. Other
complaints included lack of physical keyboard for high volume email users, relatively
weak and irreplaceable iPhone battery, inability to add memory the iphone did not
support flash technology.
In terms of smart phones, Apple has a temporary to sustained advantage. One of the
reason is its uniqueness and designs. The second is it has improved its battery life in
iPhone 5S which lasts longer than 1 day without charging a user can play music or take
camera the whole day long. Third, iPhone has a strong app store which can download
many free and low-priced applications. Fourth, it is rare. It is costly to imitate like
iPhone. However, SamSung and HTC has become its rivals in the Eastern Asia Market.
Huawei and China Brand has taken over developing countries. However, iPhone users
still prefer iPhone on top of other phones.

6- What are the prospects for the iPad?